learnwithkrish - MERCOSUR

Background

MERCOSUR is a South American trade bloc established by the Treaty of Asunción in 1991 and Protocol of Ouro Preto in 1994. Its full members are Argentina, Brazil, Paraguay and Uruguay. Whereas Bolivia, Chili, Columbia, Ecuador, Guyana, Peru and Suriname are associated members and Mexico with New Zealand are observer members. Venezuela was a full member but was suspended since December 1, 2016 on the grounds of rupture of democratic order and human rights. The official languages are Spanish, Portuguese, and Guarani. MERCOSUR's functions have been updated, amended and changed many times. It is now a full customs union and a trading bloc. In 2019, the MERCOSUR generated a nominal gross domestic product (GDP) of around 4.6 trillion US dollars, ranking 5th economy of the world. The bloc places high emphasis on the human development index and has signed free trade agreements with countries like Israel, Egypt, Japan and the European Union.

MERCOSUR formed as a customs union in 1995 followed by a free trade agreement with European Union and NAFTA and a preferential trade agreement with India in 2004.

Role of MERCOSUR

To eliminate barriers to facilitate the free movement of goods and currency among member nations.
To promote free trade and fluid movement of goods , people and currency.
To work on capacity to combine resources to balance trade activities.
To protect the inefficient Brazilian industries
To take necessary resolutions required for implementation of strategic decisions.

Source: MERCOSUR (2012) - When Venezuela joined.

Source: MERCOSUR (2017) - After suspension of Venezuela.

Suspension Of Venezuela

Venezuela officially is a federal republic on the northern coast of South America having the world's largest oil reserves. In August 2016, the presidents of Brazil, Argentina, and Paraguay, while present in Rio de Janeiro for the Olympic Games, met to discuss suspending Venezuela from MERCOSUR .

They were in doubt about whether Venezuela was complying with the union's requirements related to:

a. Full membership

b. Citing human rights violations among other issues

c. Rules governing trade, politics, democracy and human rights

Venezuela was rejected from assuming the presidency of MERCOSUR prompting a dispute that continued in full throttle to the end of the year. And on 1st December 2016, Venezuela was suspended from MERCOSUR . In 2017, the Brazilian Foreign Minister said that Venezuela shall remain suspended until the country re-establishes democracy.

India and MERCOSUR

A framework trade agreement had been signed between India and MERCOSUR on 17th June 2003. India MERCOSUR agreement came into effect on 1st July, 2003. The agreement aimed to expand and strengthen existing trade relations between India and MERCOSUR by granting reciprocal fixed trade preferences with the ultimate objective of creating a Free trade agreement. India has been wanting to export processed foods, engineering goods and a wider range of pharmaceutical products to the MERCOSUR . India has preferential access in the MERCOSUR for organic chemicals, pharmaceuticals, essential oils, plastics & articles, rubber and rubber products, tools and implements, machinery items, electrical machinery and equipment. Trade volume reached 1700 Cr in 2012 and now should reach 3000 Cr by 2030.